Tax day is sneaking up on those of us in the United States on April 18.
For travel bloggers, taxes can raise some confusing questions. Our non-traditional jobs come with some non-traditional considerations when it comes to filing taxes. Luckily, TBS member Jessica Sevrin is not only a travel blogger — she’s also a licensed CPA, and she’s here to offer tax advice for bloggers.
Jessica recently shared a survey with our community to gauge what kind of information travel bloggers are looking for when it comes to doing their taxes. She’s answering some commonly asked questions below, and will be back for even more advice in future posts.
(Update: for even more advice on taxes for travel bloggers, be sure to check out Part II of this series.)
I am a licensed CPA, long time traveler, and have a travel blog at www.LongestBusRide.com.
While meeting other travel bloggers and influencers in person and online, I began receiving requests for tax advice and tax form preparation services based on my professional tax experience and insight into the blogging industry. For advice specific to your business’ facts and circumstances, please feel free to reach out to me at Jess.Sevrin@gmail.com.
Not Ready to File Taxes?
If you are not ready for the upcoming tax due date, you can extend the filing of the federal income tax form for 6 months and state income tax forms for 5 to 7 months, depending on the state. However, this extension only allows additional time to prepare accurate forms, not an extension to pay tax.
The amount paid, if you are extending your returns, needs to be at least 90% of your tax liability. If there is some doubt as to what your tax liability may be, pay a little extra just to be safe.
Common Tax Questions for U.S. Travel Bloggers
My blog is small. At what point do I need to report income or losses on an income tax return?
All, if not nearly all, income is reportable to the IRS, regardless of whether the income is taxable. Additionally, items received for free may be reportable and taxable depending on the specific facts and circumstances. Depending on the entity type (e.g. sole proprietor, LLC, corporation) you may be able to use the taxable loss (expenses exceed income) of your blog to offset your personal taxable income, thus reducing your overall tax liability.
At what point should I hire a tax accountant as a consultant or to prepare my returns?
Think of a tax accountant as a doctor for your taxes. If you had a rash, and it was itchy or turning blue, or anything else that bothered you, you’d reach out to your doctor for advice, right?
So, if you have a question about your taxes that you cannot resolve on your own, you should reach out to a tax accountant. I tell my friends to seek out a tax accountant in these circumstances and let them know these insights.
- For assistance registering with tax authorities, reach out to a tax accountant. This is applicable to all kinds of tax—business income tax, sales tax, property tax.
- There is no minimum profit threshold for seeking tax advice or tax form preparation. There are many companies that have never made a profit, and yet have full-time tax accountants on staff. Amazon.com is a great example of this. Keep in mind that financial profit and taxable profit are calculated differently. This is because U.S. tax reporting falls under different regulations than financial accounting, namely the IRS Tax Code.
- You are currently using a tax lawyer for tax form preparation. Frequently, lawyers charge more than accountants for the same services, since tax form preparation is not their primary business. I would recommend doing a cost comparison.
- If you have questions that you cannot research yourself and feel comfortable with the information found on the IRS.gov or your relevant state tax website or current IRS publications, I recommend conferring with a tax professional.
- Certain aspects of blogging are quite different from other types of businesses, so information found online may not answer your question accurately. Your tax may be low, but if you are audited by the IRS a few years from now, it is the interest on the late payment, if you underpaid the tax, that can add up. This is similar to interest on a credit card when a balance is carried. Preventative care is recommended in many aspects of life, and tax accounting is one of them. As my car mechanic told me—get the engine belt replaced soon for $400 or risk paying $5,000 later for engine failure when the belt breaks.
What questions should I be asking when interviewing a tax accountant?
As both a blogger and a tax accountant, these are questions I would definitely include on my checklist.
- What is your certification type? Both Certified Public Accountants (CPA) and Enrolled Agents (EA) have passed exams and are licensed to practice before the IRS. You can look up a CPAs license online to confirm that it is current and the person does not have any complaints against them. For example, if you visit the California Board of Accountancy license lookup page, and enter my name, Jessica Sevrin, you will find that I am certified as a CPA and have no complaints against me.
- What is your experience with tax and the travel blogger / influencer industry? As an active travel blogger, I understand the expenses incurred and the various types of revenue streams. As a tax accountant with this insight, I understand which questions to ask of my clients and when to request additional information.
- What are your tax form preparation fees? A tax accountant will provide their fees after determining how many and which tax forms will be prepared or what tax topics need to be researched. As bloggers we adjust packages based on our clients’ budget and the quantity and type of work, such as photos, video, writing, social media sharing, and more.Accountants do the same. For example, a package including both tax form preparation and consulting might cost less if bought together than buying the two items separately, so it may help your case for a discount if you take all your work to one accountant.Finally, keep in mind, as with anything, you pay for quality. You can certainly take your tax form preparation needs to a chain accountant or use an online tax preparation service. However, they are less likely to fully understand the travel blogging industry simply because the niche is relatively new and small, and therefore the accountant or software may miss asking certain important questions for correct tax reporting.
Do I need to collect sales tax on products and services that I sell online or to someone in another U.S. state?
- Tangible Products: If the state in which a physical product (item you can touch, see, or feel) will be used or is delivered to a state that has sales tax, then most likely the answer is yes. For example, I live and work in California, which charges sales tax. Any seller that meets certain requirements must charge me the sales tax. This prevents Californians, like myself, from taking a trip to Oregon or another state with no sales tax, to purchase a new car and save possibly thousands of dollars in sales tax.
- Electronic Products: Meanwhile, e-products, like eBooks, vary in taxability by state, and this is highly technical depending on exactly what kind of e-product is delivered and how it is delivered. I highly recommended that you speak with a tax accountant before selling any new product type, so that you gain an understanding of how it can be packaged without incurring new sales tax filing requirements.
- Services: this is another highly technical area and determining factors include the state in which the service in conducted, the type of service provided (e.g. virtual assistant, photographer, tax preparation), and how the service is packaged (e.g. does it include any physical products). In fact, this is an area that requires in-depth research, with the resulting information potentially saving a lot of money in the future.Again, please confer with your tax accountant before selling any new service type, so that you gain an understanding of how it can be sold without incurring new sales tax filing requirements.
This is general tax advice. For any general tax questions, please send a note to me at Jess.Sevrin@gmail.com.
You can find the second installment of this series, here.